State budget includes cuts, but isn't shrinking

Gov. Jerry Brown points to a chart showing how his budget plans will eventually reduce the budget deficit over the next few years as he discusses his revised state budget plan during a Capitol news conference in Sacramento, Calif., Monday, May 14, 2012. Brown said the budget shortfall swelled from $9.2 billion predicted in January to $16 billion, in part because tax collections have not come in as high as expected and lawsuits and federal requirements that have blocked billions of dollars in state cuts. (AP Photo/Rich Pedroncelli)
— AP

Gov. Jerry Brown points to a chart showing how his budget plans will eventually reduce the budget deficit over the next few years as he discusses his revised state budget plan during a Capitol news conference in Sacramento, Calif., Monday, May 14, 2012. Brown said the budget shortfall swelled from $9.2 billion predicted in January to $16 billion, in part because tax collections have not come in as high as expected and lawsuits and federal requirements that have blocked billions of dollars in state cuts. (AP Photo/Rich Pedroncelli)
/ AP

Throughout the drawn-out budget debate, the message from the Democrats who control the statehouse has been that they are reluctantly making deep cuts in core public services.

The $91.4 billion general fund passed with relative ease on Friday is not shrinking, though. That figure is 5.6 percent larger than the previous year’s budget.

That represents a nearly $5 billion increase from fiscal year 2011-12 — built on the assumption that voters agree to hike the sales tax and income tax on the wealthy in November to raise $8.5 billion.

Even with that assumed infusion of added money, the budget calls for $809 million in cuts to social programs and $254 million in cuts to higher education.

The added tax money, and the cuts elsewhere, are helping pay for a 10 percent increase in the state prisons budget, costing $807 million more, and 13 percent more money for education, or $4.5 billion more.

Republicans argue that, given the growth in the budget, more taxes are not necessary. A GOP analysis claims total state spending when accounting for population growth and inflation will be $31 billion more in 2012-13 than it was in 2007-08. They say the spending plan is still laced with gimmicks rather than being balanced.

Looking at the departments with the largest apparent growth in the state budget, however, it’s clear that increases on paper may not mean more state spending:

• In “general government,” the year-over-year increase is projected to be $1.2 billion. That line item in the budget accounts for $2 billion that needs to be paid back after borrowing it from local governments to pay for schools. That added cost is tempered by $800 million in cuts to state government, leaving the $1.2 billion increase.

• The prisons budget shows an $807 million increase, but state officials say that has to do with an accounting maneuver. Money was diverted to prisons from a special fund last year, making prison spending seem artificially low at $8 billion. This year’s $8.8 billion is essentially holding steady, officials say.

• The education line item, the largest in the state budget, shows $38.5 billion — about $4.5 billion more than last year. Some of that money is not “new” for classrooms this year, however. About $2.3 billion is proposed to pay back debts owed to school districts for funding that didn’t meet legally required minimums in previous years.

The 13 percent increase on paper has put education leaders on the defensive as they seek more money.

Dennis Meyers, assistant executive director of the California School Boards Association, said much the increase is just papering over a chronic situation in which schools are getting less than mandated by state law — a deficit over time of $10 billion.

“It results in no new spending authority,” Meyers said. “So increasing costs relating to health care, fuel, and salaries results in the need to cut.”

Scott Graves, a senior policy analyst with the nonpartisan California Budget Project, said just looking at raw numbers — and not the policy drivers behind the accounting — provides only part of the story.

“At first glance, state spending going up from one year to the next is a bit of a head scratcher, especially since the Legislature is on the verge of making deep cuts,” Graves explained. “But if you look below the surface,” he continued, “you see that much of the increase is being driven by spending requirements that voters put into the state constitution.”

Those voter-approved requirements dictate certain spending for schools, local government and transportation. Democrats say they will cut welfare, social services, court funding and state employee salaries when negotiations are finished, in part to meet the voter-approved priorities.

Republicans suggest that the governor and majority Democrats are misleading taxpayers by lowballing the general fund balance to hide true spending. Instead, the general fund is propped by shifts from other non-general fund accounts to cover shortfalls and maintain spending levels.

A nonpartisan Legislative Analyst’s report prepared in February indicated that the state has employed temporary revenue transfers and loans — called “offsets” — to pay for some programs financed out of the general fund. Since 2008-2009, these hidden offsets have subsidized the general fund by $35.3 billion, according to the analyst’s report.